Just guessing here, but I would think that since PowerPoint is a Microsoft product, converting the 
avi files to 
wmv files might solve your problem.  Have you been keeping up with your avi codecs?  If you told us that you're having problems playing avi files in your Windows Media Player (another MS product), I would guarantee that it's a missing codec.
There are free video converters all over the internet.  
Any Video Converter works great for  me.
Or, Google "K-Lite codecs" and download the newest codec pack.
Good luck!